The China Development Bank has issued a $254.76 million loan to Nigeria for the Kano-Kaduna railway project, enhancing connectivity between Kano and Abuja. During a visit by China's Foreign Minister Wang Yi, President Bola Tinubu urged China to increase the $2 billion currency swap agreement and review the $50 billion aid package for Africa announced in 2023. Tinubu emphasised that expanding the currency swap would accelerate Nigeria’s infrastructure development and deepen bilateral ties. He also sought China’s support for Nigeria’s permanent UN Security Council seat bid. Wang Yi reaffirmed China’s commitment to reinforcing relations and implementing agreements from the 2024 Forum on China-Africa Cooperation (FOCAC).
The Chinese Foreign Minister's visit to Nigeria comes a few weeks after Narendra Modi, India’s prime minister and Frank-Walter Steinmeier, Germany's President Frank-Walter Steinmeier. The interest of these top economies could unlock significant economic, cultural and social benefits for Nigeria, particularly in the area of Foreign Direct Investment, which the country seeks to boost for its $1 trillion GDP by 2030 aim. Wang Yi’s visit may strengthen the growing partnership between China and Africa.
Chinese engagement in Nigeria's infrastructure sector has become a prominent feature of the country's development landscape. This involvement spans multiple sectors, such as the oil and gas sector, focusing on the transportation sector. The construction of modern railway lines, such as the Abuja-Kaduna and Lagos-Ibadan railways, undertaken by the China Civil Engineering Construction Corporation (CCECC), represents a significant modernisation effort of Nigeria's rail network.
Although the slow growth of China’s economy since the pandemic has reduced the largesse made available by the Belt and Road Initiative, China has had to reassess its strategic leverage in light of intense competition with the US, which is set to become even more heated with the return of Donald Trump to the White House next week. Although the Nigerian government is pressed for money to fund its gaping infrastructure deficit, the significant challenge for the Kaduna-Kano rail project is not money but the security of the personnel working on the route and the equipment used.
In 2024, there was a noticeable spike in cases of infrastructure vandalism in several parts of Northern Nigeria, which the state struggled to deal with. Infrastructure security or energy security in Nigeria is usually treated as an afterthought despite its importance to the economy. Without improving security, especially for the rail tracks and the trains, the NRC’s projected commencement date slated for the first quarter of this year would be quite impossible. Despite the benefits attached to Chinese investments in infrastructure, there are concerns about the impact on local industries and job creation. It is often argued that Chinese-funded projects in Nigeria rely heavily on imported materials and Chinese labour, limiting the involvement of local industries that could otherwise supply goods and services for these large-scale ventures. This approach hampers opportunities for Nigerian businesses to grow, develop, and integrate into critical value chains.
Additionally, Chinese companies operating in Nigeria have faced allegations of poor labour practices, including limited skill transfer to Nigerian workers and creating jobs that are predominantly low-wage and short-term. This dynamic undermines Nigeria’s aspirations to build a skilled workforce and drive sustainable industrialisation. Moreover, Nigeria continues to export raw materials, such as gold, iron ore, and other natural resources, to China. These raw materials are processed into finished products and subsequently imported at higher costs. This pattern perpetuates a dependency on foreign economies, resembling modern-day economic neocolonialism, where value addition and manufacturing occur outside the country. While Chinese investments have undeniably contributed to Nigeria’s infrastructure development, it is crucial for these partnerships to be structured in a manner that fosters inclusive economic growth, creates meaningful employment opportunities, and strengthens local industries.
Then, the burden of debt that comes from these investments is concerning. Data published by the National Bureau of Statistics shows that the Nigerian Railway Corporation generated revenue –not profit– of ₦4.8 billion ($2.87 million) between January and August 2024. In contrast, Nigeria’s debt to the Exim Bank of China, which funded the construction of certain roads and rail lines, was $5 billion at the end of June 2024. Debt can be good when it is used to fund income-generating projects. This means that the projects can repay the loans while improving the lives of citizens. However, the Nigerian government keeps trying to fund political programmes with loans. For instance, end-of-year festivities and religious holidays come with significant travel and demand for rail transport. However, the government chose to offer free rides during the festive period on railway facilities that have not repaid the debts with which they were built. There must surely be an African proverb that warns against giving away freely what is borrowed.
On the other hand, the Nigerian government failed to optimally exploit the Naira-Yuan deal despite the significant trade between Nigeria and China. However, the Trump presidency may not react positively to a deal that sidetracks the dollar. Rumours of an impending tariff on China and the US reaction to the BRICS further complicate things. It remains to be seen what becomes of this currency swap deal the second time around.